Data & Research February 2, 2009

73% of DC Sponsors Plan No 2009 Match Changes

While media accounts may be full of reports of employer decisions to suspend their retirement plan company match contributions, 73% of DC plan sponsors in a new survey plan no match changes.
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A Callan Associates news release about its DC sponsor poll said 1% planned a match decrease while 20% of respondents were unsure what steps they might take by the end of 2009 regarding the match.

One thing of which participating sponsors were certain: They intend to step up communications with participants in coming months. In fact, two out of three sponsors intend to provide more DC communication/education in 2009.

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Of these, according to the announcement:

  • 95% will increase investment communication.
  • 71% will increase communication around participation.
  • 64% will increase communication about retirement income adequacy.

Another area of DC sponsor certainty, according to the Callan data, sponsors’ primary areas of focus in 2009 are fund/manager performance and due diligence.

More than one-third (39%) of participating firms replaced a fund/manager in 2008 for performance-related reasons. Some 44% said they expect to replace a fund/manager for performance-related reasons in 2009.

Keeping a Closer Eye

Stepped-up monitoring is also a priority for respondents to Callan’s survey. Plan sponsors have been increasing investment committee meetings by holding ad hoc sessions or changing to monthly get-togethers.

More than three-quarters (76%) of plan sponsors report increasing the number of investment committee meetings in light of market volatility.

The Target-Date Fad

The Callan poll also reflected the continuing explosion in the popularity of target-date funds. According to the Callan announcement:

  • 59% of plans now use a target-date fund series as their default investment vehicle, up from 32.5% in 2006. Nearly half (43%) of plans use the target-date funds of their recordkeeper.
  • Balanced and asset allocation funds are used by 23.1% of plans, down from 27.5% in 2006.
  • Stable value is used by 12% of plans, down from 30% in 2006.

Portfolio construction, or the glidepath, of the target-date fund ranks as the most important criteria in selecting or retaining target-date retirement funds. Performance ranks a distant second.

Reassessing plan features and design ranks low in priority for plan sponsors in 2009. Few plan sponsors expect to add a Roth contribution, investment advice, automatic enrollment, or contribution escalation to their plans, according to the Callan data.

The Callan survey was fielded online in late November and early December 2008, and results incorporate responses from 107 companies. The majority (79.8%) of respondents offered 401(k) plans. Other respondents provided profit sharing, 457, and 403(b) plans. The majority of plans had more than $100 million in assets and nearly one-third had assets of $1 billion or more.

The Markets February 2, 2009

Macy’s Expense Reductions to Include 2009 Match Cuts

Department store retailer Macy’s Inc. joined the growing list of employers slashing their 401(k) match to save money in the difficult economic environment.
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In addition to the unspecified 2009 match reduction, the company announced Monday it planned to cut about 7,000 jobs. Merit salary increases for executives considered in spring 2009 for performance in 2008 are also being eliminated across the company, Macy’s said.

In addition, management will be recommending to the board of directors a reduction in perquisites for executives, including merchandise discounts, company cars, company-paid life insurance, and financial counseling, according to a company news release.

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Macy’s said it expects these steps to reduce its previously planned expenses by about $400 million per year starting in 2010 and $250 million in part of 2009. The cost-cutting also includes integrating its divisions into one unit. Its Bloomingdale’s stores will not be affected by these initiatives, Macy’s said.

According to that plan, it will group its stores into 69 geographic areas with an average of 10 to 12 stores in each district.

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